Gerald Johnson, a director at Caterpillar (CAT), recently bought 100 shares. The buy increased his position by 5%, and came to a total cost of $35,640.
Johnson is the second director to buy this month, following a 500 share pickup from another director. There has been a large sale from a company Group President in the past month, amounting to a $7.8 million sale. Other executives have also been sizeable sellers in the past year, largely following the exercise of stock options.
Overall, Caterpillar insiders own 0.2% of shares.
The agricultural machinery manufacturer is up 70% over the past year, far beating the overall market, thanks to strong construction and infrastructure spending. So it’s easy to see why many executives are cashing out shares now.
But with the stock trading at 16 times forward earnings, and with those earnings up 47% in the past year, investors who buy shares on a pullback should fare just fine with the stock.
Action to take: Shares have recently pulled back from an all-time high of $382.01. Today’s buyers may want to build a position up to $360. At current prices, Caterpillar also pays a 1.5% dividend.
For traders, the July $380 calls, last trading for about $4.25, could see mid-double-digit returns on a trend higher in the coming weeks.
Disclosure: The author of this article has no position in the company mentioned here, but may trade after the next 72 hours. The author receives no compensation from any company mentioned in this article.